Energy Prices

Amber Rudd Excerpts

Wednesday 14th January 2015 Commons Chamber

[The Parliamentary Under-Secretary of State for Energy and Climate Change (Amber Rudd)]

This has been a welcome opportunity to debate one of the biggest issues in British politics, and there have been some lively contributions from both sides of the Chamber. Helping households to stay warmer for less has been the No. 1 priority for this Government. That is why, since coming into office, we have been working hard to make the energy market more competitive and to break the stranglehold of Labour’s big six.

We have taken action to encourage switching, to reduce policy costs on bills and to support the first competition inquiry since privatisation. Indeed, since 2010, the number of independent suppliers has nearly trebled, to 19, and their market share is now the highest on record, at 10.5%. We have slashed the number of energy tariffs and ensured that suppliers are putting people on the cheapest variable tariff, helping consumers to save up to £200. New figures suggest that the savings could be up to £300. We supported the first competition inquiry since privatisation. The Labour Government did none of those things when they had the chance.

Yesterday, E.ON announced that it was cutting its standard variable gas price by 3.5%. That is very welcome news for households, and energy suppliers must continue to pass on savings from lower gas prices. Yet the chief executive officer of E.ON has admitted that, given the possibility of a price freeze, the company was “undoubtedly taking a risk”. We should be clear that this reduction would not have happened under the Opposition’s ludicrous price freeze policy, which would have resulted in high bills being frozen until 2017 and families being unable to feel the benefit of falling global gas prices.

[Albert Owen]

I am sorry to interrupt the Minister’s party political speech—[Laughter.] Conservative Members may laugh, but they are on the wrong side of the argument when it comes to consumers. On the 3.5% reduction in the price of E.ON’s gas, is she as confused as I am about why there has been no throughput to the company’s electricity price, which is not being reduced? When gas prices go up, it is the companies, not the Secretary of State, that tell us they have to follow suit and increase electricity prices.

[Amber Rudd]

Electricity prices have not fallen at that rate. I must gently tell the hon. Gentleman off for suggesting that I might be trying to “weaponise” this important subject. That is something we should never do.

We know that the cheapest tariff currently on the market is £100 cheaper than the cheapest tariff a year ago, and that if Labour had been able to freeze prices in October 2013, customers would already be £100 a year worse off. Labour’s price freeze proposal is preventing bills from falling further. I know that the right hon. Member for Don Valley (Caroline Flint) likes to take comments such as these as confirmation of an expectation of another Labour Government, but the frisson of fear from the market at the prospect of the chaos that would ensue under a Labour Government is resulting in suppliers being unsure about making price reductions.

Labour does not understand that we need to fix the market for good, not freeze it. That means taking policy costs off bills, forcing suppliers to be transparent about their costs and profits, and getting behind the independent inquiry, which reports in June and has the power to break up Labour’s big six. Unfortunately, the Labour party appears to think that it can make up for its total failure to reform the energy market during its 13 years in office by advocating short-term gimmicks. This goes to the heart of the debate on the future of the energy market and the debate that we have heard today.

Let us consider for a moment what regulating to require that suppliers pass on reductions in wholesale costs would mean in practice. For a start, it is likely to mean more volatile prices for customers. Gas wholesale prices can change significantly and unexpectedly. If companies have to put prices down immediately following a reduction in wholesale prices, they will have to put them up immediately after a rise, so I think we can see from the contributions we have heard and from the comments from people in the market that that would not work.

Let me address some of the comments made in this afternoon’s enthusiastic debate. The right hon. Member for Neath (Mr Hain) told us about the Severn barrage project and his view about the opportunities for cheap electricity from it. We all listened carefully and I thank him for his contribution. My hon. Friend the Member for South Suffolk (Mr Yeo), the chair of the Energy and Climate Change Committee, highlighted other areas where we could bear down on costs and the action that Ofgem needed to take. The hon. Members for Glasgow North West (John Robertson), for Ynys Môn (Albert Owen) and for Rutherglen and Hamilton West (Tom Greatrex) spoke about fuel poverty. I wish to remind the House of this Government’s absolute commitment to reducing fuel poverty. We have made that central to our policies since we came to office. We recognise that vulnerable consumers need more action to help them take action to save money.

One point made by the hon. Members for Ynys Môn and for Inverclyde (Mr McKenzie) is that not everybody is able to take action to switch, and they questioned the value of switching. That is why we have committed nearly £2 million over two years to fund community and voluntary organisations through the big energy saving network; our network provides specially trained volunteers to help consumers in communities across the country to get better deals from energy suppliers and reduce their energy bills—this helped more than 90,000 people last winter. We know that there are people out there who need our help and we are determined to make sure that they get it, so that the most vulnerable are never left behind.

My right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan) gave us an excellent talk on Labour party policy, saying that the tide can go out but the Opposition think, extraordinarily and Canute-like, that they can bring it back. I was grateful for the contribution from the hon. Member for Wansbeck (Ian Lavery), who chose to characterise this debate as being about big business versus people. He is quite wrong. This is not an example of that; it is an example of an energy market that needs to be regulated well. I urge Opposition Members not always to think of businesses, which provide investment and employment, and which are vital to our economy, as somehow being wicked.

My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) made his usual excellent contribution, commenting on behalf of his constituents. He stressed that not only is Labour’s proposal wrong, but it could cost constituents money. May I say what a pleasure it was to visit him in Kippax in his constituency to see the excellent work being done for home efficiencies in his area? The hon. Member for Inverclyde raised issues on behalf of consumers, specifically referring to direct debits. May I point out to him that this Government have regulated for money accumulated by energy companies under direct debit always to be returned by the end of the year? I was interested to hear of the project he mentioned, whereby there was local working with his vulnerable constituents.

My hon. Friend the Member for Monmouth (David T. C. Davies) pointed out that shareholders of these energy companies play an important part in our community, too. It was good to hear of his enthusiasm for shale, although less so for smart meters—let me reassure him that they will not be compulsory. The hon. Member for Angus (Mr Weir) spoke about fuel poverty and he should be in no doubt of our efforts to help people out of fuel poverty—we will continue to do that. I should point out to him that switching is an important part of not only delivering lower bills on a one-off basis, as he described, but stimulating other independent companies to join the market. Competition is the way to reduce the costs. My hon. Friend the Member for Tamworth (Christopher Pincher) highlighted the chaos of the Labour party and the need for energy companies to generate funds to invest—he is quite right.

My hon. Friend the Member for Dover (Charlie Elphicke) contrasted the chaos of Labour’s policies, both in this area and more generally, with the competence and careful planning, which is needed for a stable economy, under this Government. The hon. Member for Southampton, Test (Dr Whitehead) made the case for the regulator to regulate hedging policies, which is, I think, a little ambitious.

We have had an excellent debate, which, as always, has raised a lot of interest from fellow Members. But let me make the point that it is only by providing the right competitive framework that we will help to ensure that investment in our energy markets continues to flow, that industry can grow and that the markets deliver for consumers. Only through fixing the market for good—not interesting, temporary, short-term gimmicks—can we truly help consumers to stay warmer for less. I urge the House to reject the motion.

Question put.